2 Music Retailers Say They Will Harmonize Online

JENKINTOWN, Pa. — CDnow Inc. and N2K Inc., two of the biggest players in online music retailing, said they agreed to merge in a stock deal worth about $101.8 million, a move that would create an Internet music seller with about 1.2 million customers.

The merged company, to be called CDnow/N2K Inc., would compete with cyberspace rival Amazon.com Inc., a Web bookseller that in June began selling CDs to more than 3.5 million customers. The new company, which analysts say would be based in New York, would offer about 500,000 items via the Internet.

The move comes after weeks of speculation the two companies would join forces in order to offset their falling stock prices and poor earnings. Both companies reported wider losses for the third quarter that were even worse than analysts expected.

N2K shareholders would receive 0.83 share in the new company for each N2K share, and CDnow shareholders would receive 1 share in the new company for each CDnow share.

The merger is expected to close by early 1999, subject to shareholder and regulatory approvals.

On the New York Stock Exchange, the stock of New York-based N2K rose 50 cents to close at $6, while shares of Jenkintown, Pa.-based CDnow fell 81 cents to $8.63.